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controlling Performance
Checklist: A form used to record the frequency of
occurrence of certain service or product
characteristics related to performance.
Histogram: A summarization of data measured on
a continuous scale, showing the frequency
distribution of some quality characteristic (the
central tendency and dispersion of the data).
Bar chart: A series of bars representing the
frequency of occurrence of data characteristics
measured on a yes-or-no basis.
Pareto Chart: A bar chart on which factors are
plotted in decreasing order of frequency along the
horizontal axis.
2007 Pearson Education
Bar Chart
Pareto Chart
Equipment
Aircraft late to gate
Other
Mechanical failures
Delayed
flight
departures
Weather
Materials
Procedures
.
The Wellington Fiber Board Company
produces headliners, the fiberglass
components that form the inner roof of
passenger cars. Management wants to identify
which defects were most prevalent and to find
the cause.
They decide to use the following tools:
Step 1. Checklist
Step 2. Pareto chart
Step 3. Cause-and-effect diagram
Step 4. Bar chart
Tally
Total
A. Tears in fabric
////
B. Discolored fabric
///
D. Ragged edges
//// //
7
Total
36
50
Pareto Chart
50
80
30
60
20
40
10
20
Defect type
Cumulative Percentage
Number of Defects
40
100
Cause-and-Effect Diagram
People
Materials
Training
Out of specification
Not available
Absenteeism
Communication
Machine maintenance
Humidity
Schedule changes
Machine speed
Wrong setup
Other
Process
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Broken
fiber
board
Example 5.3
Bar Chart
15
10
5
0
First
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Second
Shift
Third
Costs of Poor
Process Performance
Defects: Any instance when a process fails to
satisfy its customer.
Costs of Poor
Process Performance
Prevention costs are associated with
preventing defects before they happen.
Appraisal costs are incurred when the firm
assesses the performance level of its processes.
Internal failure costs result from defects that
are discovered during production of services or
products.
External failure costs arise when a defect is
discovered after the customer receives the
service or product.
Prevention costs
Includes cost of redesigning the process to
remove the causes of poor performance
Redesigning the service or product to make
it simpler to produce
Training employees in the methods of
continuous improvement
Working with suppliers to increase the
quality of purchased items or contracted
services
In order to improve performance firms must
invest additional time effort and money.
2007 Pearson Education
Appraisal costs
As preventive measures improve
performance appraisal cost decrease
because fewer resources are needed for
quality inspections and subsequent search
for cause of any problems that are detected.
Statistical
Process Control
Statistical process control is the application of
statistical techniques to determine whether a process is
delivering what the customer wants.
Acceptance sampling is the application of statistical
techniques to determine whether a quantity of material
should be accepted or rejected based on the inspection
or test of a sample.
Variables: Service or product characteristics that can
be measured, such as weight, length, volume, or time.
Attributes: Service or product characteristics that can
be quickly counted for acceptable performance.
2007 Pearson Education
Sampling
Sampling plan: A plan that specifies a
sample size, the time between successive
samples, and decision rules that determine
when action should be taken.
Sample size: A quantity of randomly
selected observations of process outputs.
Sampling Distributions
A sample mean is the sum of the observations
divided by the total number of observations.
Sample Mean
n
i 1
where
xi = observations of a quality
characteristic such as time.
n = total number of observations
x = mean
Sample Range
The range is the difference between the largest
observation in a sample and the smallest.
The standard deviation is the square root of the
variance of a distribution.
where
x x
i
n 1
Process Distributions
A process distribution can be characterized by its
location, spread, and shape.
Location is measured by the mean of the
distribution and spread is measured by the range or
standard deviation.
The shape of process distributions can be
characterized as either symmetric or skewed.
A symmetric distribution has the same number of
observations above and below the mean.
A skewed distribution has a greater number of
observations either above or below the mean.
2007 Pearson Education
Causes of Variation
Two basic categories of variation in output include
common causes and assignable causes.
Common causes are the purely random,
unidentifiable sources of variation that are
unavoidable with the current process.
If process variability results solely from common causes
of variation, a typical assumption is that the distribution is
symmetric, with most observations near the center.
Assignable causes of variation are any variationcausing factors that can be identified and eliminated,
such as a machine needing repair.
2007 Pearson Education
Assignable Causes
The red distribution line below indicates that the process produced a
preponderance of the tests in less than average time. Such a distribution
is skewed, or no longer symmetric to the average value.
A process is said to be in statistical control when the location, spread,
or shape of its distribution does not change over time.
After the process is in statistical control, managers use SPC procedures
to detect the onset of assignable causes so that they can be eliminated.
Location
Spread
Shape
Control Charts
Control chart: A time-ordered diagram that is used to
determine whether observed variations are abnormal.
A sample statistic that falls between the UCL and the LCL indicates that the process
is exhibiting common causes of variation; a statistic that falls outside the control
limits indicates that the process is exhibiting assignable causes of variation.
Statistical Process
Control Methods
Control Charts for variables are used to monitor the
mean and variability of the process distribution.
R-chart (Range Chart) is used to monitor process
variability.
x-chart is used to see whether the process is
generating output, on average, consistent with a
target value set by management for the process or
whether its current performance, with respect to
the average of the performance measure, is
consistent with past performance.
If the standard deviation of the process is known, we can
place UCL and LCL at z standard deviations from the
mean at the desired confidence level.
2007 Pearson Education
Control Limits
The control limits for the x-chart are:
UCLx = =x + A2R and LCLx= x=- A2R
Where
=
X = central line of the chart, which can be either the average of past
sample means or a target value set for the process.
A2 = constant to provide three-sigma limits for the sample mean.
The control limits for the R-chart are UCLR = D4R and LCLR = D3R
where
R = average of several past R values and the central line of the chart.
D3,D4 = constants that provide 3 standard deviations (three-sigma)
limits for
a given sample size.
2007 Pearson
Education
Calculating
Three-Sigma Limits
Table 6.1
1
0.5014
0.5021
0.5018
0.5008
0.5041
Sample
2
3
0.5022 0.5009
0.5041 0.5024
0.5026 0.5035
0.5034 0.5024
0.5056 0.5034
4
0.5027
0.5020
0.5023
0.5015
0.5039
R
0.0018
x
0.5018
(0.5014 + 0.5022 +
0.5009 + 0.5027)/4 = 0.5018
1
0.5014
0.5021
0.5018
0.5008
0.5041
Sample
2
3
0.5022 0.5009
0.5041 0.5024
0.5026 0.5035
0.5034 0.5024
0.5056 0.5034
4
0.5027
0.5020
0.5023
0.5015
0.5047
R=
R
0.0018
0.0021
0.0017
0.0026
0.0022
0.0021
x= =
x
0.5018
0.5027
0.5026
0.5020
0.5045
0.5027
Factor for
LCL for
x-Charts
R-Charts
(A2)
(D3)
2
1.880
0
3.267
3
1.023
0
R = 0.0021
2.575
4
0.729
0
D4 = 2.282
2.282
5
0.577
0
UCLR = D4R = 2.282 (0.0021) = 0.00479 in.
D3 = 0
2.115
LCLR = D3R 0.483
0 (0.0021) = 0 in.
0
2007 Pearson Education 6
2.004
UCL
R(D4)
Factor for
LCL for
x-Charts
R-Charts
(A2)
(D3)
2
1.880
0
3.267
3
1.023
0
R = 0.0021 A2 = 0.729 =x = 0.5027
2.575
0.729+ 0.729 (0.0021) 0= 0.5042 in.
UCLx4= x= + A2R = 0.5027
2.282 =
LCLx 5= x - A2R = 0.5027
0.577 0.729 (0.0021) =0 0.5012 in.
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2.115
UCL
R(D4)
Control Charts
for Attributes
p-chart: A chart used for controlling the
proportion of defective services or products
generated by the process.
p =
p(1 p)/n
Where
n = sample size
p = central line on the chart, which can be either the historical
average population proportion defective or a target value.
and LCL = pz
Control limits are: UCLp = p+z
p
p
p
z = normal deviate (number of standard deviations from the average)
2007 Pearson Education
Hometown Bank
Example 6.3
The operations manager of the booking services department of
Hometown Bank is concerned about the number of wrong customer
account numbers recorded by Hometown personnel.
Each week a random sample of 2,500 deposits is taken, and the number
of incorrect account numbers is recorded. The results for the past 12
weeks are shown in the following table.
Is the booking process out of statistical control? Use three-sigma control limits.
2007 Pearson Education
Hometown Bank
Using a p-Chart to monitor a process
n = 2500
p=
p =
p =
147
= 0.0049
12(2500)
p(1 p)/n
0.0049(1 0.0049)/2500
p = 0.0014
UCLp = 0.0049 + 3(0.0014)
= 0.0049
0.0091 3(0.0014)
LCLp =
= 0.0007
2007 Pearson Education
Sample
Number
Wrong
Account #
Proportion
Defective
1
2
3
4
5
6
7
8
9
10
11
12
15
12
19
2
19
4
24
7
10
17
15
3
0.006
0.0048
0.0076
0.0008
0.0076
0.0016
0.0096
0.0028
0.004
0.0068
0.006
0.0012
Total
147
Hometown Bank
Using a p-Chart to monitor a process
Example 6.3
c-Charts
c-chart: A chart used for controlling the number of defects when
more than one defect can be present in a service or product.
The underlying sampling distribution for a c-chart is the Poisson
distribution.
The mean of the distribution is c
The standard deviation is c
A useful tactic is to use the normal approximation to the Poisson
so that the central line of the chart is c and the control limits are
UCLc = c+z c
and LCLc = cz
20 = 11.06
Number of Defects
Solver - c-Charts
Sample Number
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Process Capability
Process capability is the ability of the
process to meet the design specifications
for a service or product.
Nominal value is a target for design
specifications.
Tolerance is an allowance above or below
the nominal value.
Process Capability
Nominal
value
Process distribution
Upper
specification
Lower
specification
20
25
Process is capable
30
Minutes
Process Capability
Nominal
value
Process distribution
Upper
specification
Lower
specification
20
25
30
Minutes
Effects of Reducing
Variability on Process Capability
Nominal value
Six sigma
Four sigma
Two sigma
Lower
specification
Upper
specification
Mean
Cpk = Minimum of
x= Lower specification
3
Upper specification x=
3
Cp =
Cpk = Minimum of
Cpk =
Cpk =
x= Lower specification
Minimum of
26.2 20.0
3(1.35)
Minimum of
1.53, 0.94
Upper specification x=
3
30.0 26.2
3(1.35)
= 0.94
Process
Capability
Index
6
= 1.23 Process Capability Ratio